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What's in Store for AppFolio (APPF) This Earnings Season?

Zacks Equity Research

AppFolio, Inc. APPF is set to report third-quarter 2015 results on Nov 9. Let’s see how things are shaping up for this announcement.

Factors to Consider

AppFolio offers online management software applications to small and medium-sized property management and legal companies.

AppFolio launched its IPO on Jun 26 and now trades under the symbol APPF. The company offered 6.2 million shares at a rate of $12 per share and expected the net proceeds in the range of $71.4 million and $82.6 million.

Notably, the company plans to use the money to increase its financial flexibility and workforce as well as for investment in research and development.

The company’s second-quarter 2015 revenues saw a 59% year-over-year increase to $18.4 million from $11.6 million. Unfortunately, the company has had a history of incurring losses. In the last quarter, it posted a loss of $3.4 million compared with a loss of $3.2 million reported in the year-ago quarter.

Nevertheless, the company has been able to significantly increase its revenue on a year-over-year basis and the trend should continue in the to-be-reported quarter as well. The software solutions market for small-to-medium sized businesses is projected to double to $125 billion between now and 2016. If the company can improve its profitability, it can be a valuable tech stock, going ahead.

Earnings Whispers

Our proven model does not conclusively show that AppFolio is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 15 cents. Hence, the difference is 0.00%.

Zacks Rank: AppFolio’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a couple of companies which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Canadian Solar Inc. CSIQ, with an Earnings ESP of +29.63% and a Zacks Rank #2.

Inter Parfums Inc. IPAR, with an Earnings ESP of +15.00% and a Zacks Rank #2.

CoLucid Pharmaceuticals Inc. CLCD, with an Earnings ESP of +11.27% and a Zacks Rank #2.

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APPFOLIO INC-A (APPF): Free Stock Analysis Report
CANADIAN SOLAR (CSIQ): Free Stock Analysis Report
INTER PARFUMS (IPAR): Free Stock Analysis Report
COLUCID PHARMA (CLCD): Free Stock Analysis Report
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